Top 4 Business Plan Mistakes

In our work with many business owners and startups we often see the same repeat mistakes. Here are 4 of the biggest ones:

1. Unrealistic Financial Projections.
One of the biggest mistakes made in business plans are unrealistic financial projections. The assumption that a start-up business will immediately be profitable is often a naive mistake made by beginning entrepreneurs. Most start-up companies should anticipate being “in the red” for at least the first year of business.

Another major down fall in the financial projections is the tendency to over estimate your start-up costs and financial needs. The last thing an investor or bank wants to see is an overly greedy entrepreneur looking for a boat load of cash without proper reasoning to back it. We make sure that our clients have reasonable cost evaluations and financial projections in order to properly display the business’ future financials and appeal to banks and investors.

2. Inadequate Research.
All claims and statements in your business plan must be double-checked and substantiated. Your company’s market research must be thorough and specific to your market location and competitors. Often times, the biggest down fall to entrepreneurs in this category is a lack in available research resources and access to the specific information in your business’ geographical area.

Ethos pulls from over 30 paid databases full of specific geographical research broken down by individual business types and industries. We strive to provide our clients with the most accurate research details in their specific area of expertise.

3. Oblivious to Competition.
It is an overly common mistake for an entrepreneur to state that there is no competition or that competition is inadequate without documenting the real threats to your business. You must be realistic in this area of your business plan. Investors want to see a thorough competitor evaluation in order to trust that you know what it takes to compete with the best in your industry. Unfortunately, one of the most common mistakes we see in this industry is an overestimation in the importance or demand for an entrepreneur’s product.

Everyone has a “brilliant idea”, that’s why they’re going into business, but it’s very easy to get caught up in the excitement of your new business or product and lose sight of reality. There are very few instances where you will have absolutely no competition.

4. Too Long.
It’s very easy to get overly exciting and caught up in every little detailed plan for your business. Investors want to see a clear, concise business plan without the fluff and filler about your dreams and hopes for the business. They care strictly about the company or product itself, the people that will be in charge of it, its ability to succeed and how much money they will be forking over for it. Don’t get lost in your own imagination and the dream you want to portrait. Stick to the facts and relevant information that investors are looking for.

Ellisa Brenneman has started green businesses and has vast experience managing public, media and investor relations for small-cap public and private companies. Since 2006, Ellisa has been the President and Owner of Ethos 360. Ethos 360 provides entrepreneurs with custom business plans written by a team of experts, one-on-one business consulting, professional branding services and corporate finance coaching so they can launch and grow their businesses. Visit www.Ethos360.com for additional information.

Please Share This Article If You Enjoyed It:

  • Tamara

    Excellent article, really enjoyed it!

  • Ron Northcot

    I’ve seen #1 countless times. This is a huge mistake new business people make.

  • Emerald Taylor

    I can agree with this….. I can be long winded for myself….. Now when I help others as well as myself I will make it short and to the point… Thank you for this

  • Great article – thank you! I also recommend that new entrepreneurs SCHEDULE TIME into their upcoming year to review and revise their new business plan. Lots of plans get written and then never looked at again.
    Thanks

  • Miller Ralph95

    Its a good article with good advice. It should be viewed as the tips of varous icebergs you will have to navigate through and around as your business grows. In fact 1 year into your business(assuming you make it that far) your business plan will acquire realitites that will alter many items in your planning.
    Add to your computer a “what if” buttion. You will find that flexibility and planning for flexibility becomes the life blood of a young comapny.

  • Tony

    I’m wondering why ethos 360’s website, phone, and email is not working? I am a current customer and have not been contacted by my supposed lead consultant. Furthermore the initial product from this company has not been revised as they claim they will do. What’s going on Ellisa? Your twitter acct and LinkedIn has been deactivated? So should I guess the worst and say I’ve been had by this company?

    • Hi Tony – they mentioned a couple of days ago that they were redesigning their website, not sure if that’s connected to the site being down. I’ll shoot them an email.

      • Leah

        The website does not give a message to say that the site is being updated or re-designed but rather cannot be found. Interesting recommendation given the article & the difficulty in accessing for business planning services. Many thanks though great article

  • donald

    Her company is shut down. They are continuing to charge customer credit cards for work not delivered and she is nowhere to be found. I suppose you’ll be able to find her soon enough….in jail.

  • Tony and Donald – looks like there has been an update on Ethos360 (see link below). And Donald you’re right, the company has shut down and left many of its customers unhappy according to this article: http://blog.oregonlive.com/complaintdesk/2011/10/customers_nationwide_upset_aft.html

  • Gwbricker

    All four points are well-taken. One other major problem that I see is that the focus is too heavily on the numbers and too little on action plans. Dan Gilbert, CEO of Quicken Loans said “The numbers don’t lead, they follow.” The business plan must include clear goals that are derived from a strategic plan with action steps to accomplish the goals.